Airline shares extend fall as oil prices rise; IndiGo dips 10% in two days

Shares of airline companies have fallen up to 5% on the BSE in early morning trade on Thursday, extending their Wednesday’s decline on rise in crude oil prices.

InterGlobe Aviation (IndiGo), Jet Airways and SpiceJet were trading in the range of 3% to 5%, as compared to a marginal 0.1% decline in the S&P BSE Sensex at 09:50 AM. All these stocks are trading near to their respective 52-week lows, had fallen up to 6% on yesterday.

Oil prices inched up on Thursday, extending solid gains from the previous session on a fall in U.S. crude inventories and expected disruptions to supply from Iran and Venezuela, the Reuters report suggested.

In past one month, airline stocks have underperformed the market by falling in the range of 8% to 25%, as compared to a 3% rise in the Sensex. They tanked between 25% and 37% in the past three months, against 11% surge in the benchmark index.

Among the individual stocks, IndiGo has dipped 5% to Rs 921, extending its previous day’s 5.5% decline on the BSE. SpiceJet slipped 4% to Rs 78.15, trading close to its 52-week low of Rs 76.05 touched on Friday, August 24, 2018.

Three aviation companies had reported a combined net loss of Rs 13.33 billion in April-June 2018 quarter (Q1FY19). These companies posted an aggregate net profit of Rs 10.37 billion in the same quarter last fiscal.

The profitability was majorly impacted by the adverse impact of foreign exchange, high fuel prices and the competitive fare environment.

“Sharp uptick in ATF prices (accounted for 40% of revenue in past) and INR depreciation (the bulk of the cost is USD denominated) will impact profitability given high price sensitivity of the Indian consumer leaving limited ability to pass on costs. Existing airports at Indian metros like Mumbai, Chennai, and Kolkata running at peak capacity could prove to be bottlenecks for growth,” analysts at Edelweiss Securities said in result update.

COMPANY	LATEST	PREV CLOSE	LOSS(%)
INTERGLOBE AVIAT	923.4	969.55	-4.76
SPICEJET	78.25	81.3	-3.75
JET AIRWAYS	284.25	291.7	-2.55